PLANS to allow Limited Liability Partnership (LLP) structure in the road sector have run into a roadblock, as an expert panel set up by Prime Minister Manmohan Singh to suggest ways to expedite highway construction in the country has rejected the proposal. The committee under the chairmanship of Planning Commission member BK Chaturvedi has said that the hybrid model should be permitted only after its operational success in other areas is established. “The LLP structure may be permitted in roads only after gaining more experience on the operational aspects. And hence the issue of granting tax exemption under section 80-IA to LLPs may not arise at this stage,” the panel has said in its report. In a bid to achieve the ambitious target of building 7,000 km of highways in the country, the road transport and highways ministry had earlier mooted the idea of allowing LLPs to participate in highway construction. LLPs are a hybrid between companies and partnership firms. The participating firms’ liability is limited to the stake they hold in a LLP. The model concession agreement for highways does not list LLPs among entities that can bid for projects. “LLPs are just a variant of existing model whereby more than two private firms can form consortium and bid for a project. There does not appear any desperate move to allow LLPs in the sector as enough fund is already available. We have got good response from developers for the projects we bid out recently,” a senior road transport and highways ministry official, who did not want to be quoted, told ET. LLP, a corporate business vehicle that allows members flexibility to organise internal structure as partnership, is a very new concept in India and had been introduced only last year. The LLP has tax advantage over the popular special purpose vehicle (SPV) model in the road sector. “While there are enough provisions to claim compensation in case of default by a private firm in the existing bid document, the risk of capital for government is higher in case of LLP,” said S Vasudevan, infrastructure sector expert with consulting firm KPMG. Private developers are keen to develop highways through LLP as it does not require companies to pay 17% tax on the dividend. “As I understand, LLPs do not have dividend issue. The existing rule requires SPV to pay tax on dividend given to holding company,” Soma Enterprise director Ankineedu Maganti said adding the existing cash management system for SPV was very inefficient.